When it comes to the switching hour, the time is now

Like the some class of money-saving hipster, Pricewatch has been banging on about switching since way before it was cool. “Switch this and save hundreds,” we’d say. Or “Lads, if you’d only switch that you could save thousands of euro and go on a lovely holiday instead”.

Over and over again, on this very page and on any other platform given to us, we highlighted how moving from company A to company B could save people truckloads of cash and then we’d marvel at how few people actually listened to us and how so many more seemed willing, if not exactly happy, to simply waste money by sticking with providers who were effectively gouging them.

Truth be told, sometimes we didn’t even listen to ourselves as life got in the way of making those calls.

But with the cost of living crisis deepening as 2022 races towards the finish line, there has been a pretty significant shift in consumer behaviour and more people than ever have started switching – although to borrow from election manifestos of times past, while there’s a lot done there’s more to do.

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Last week we took to Twitter with a question. Has 2022 made you more likely to shop around for service providers and to actively switch if there is money to be saved?

More than 400 people voted in our poll and while the results are entirely unscientific they do offer a glimpse into how our world has changed. All told, 71 per cent of people said that the cost of living crisis had made them more likely to switch providers in search of better value while 14 per cent said the crisis wouldn’t make them any more likely to seek out better value. A similar percentage said they had got a little bit better when it came to switching.

[ Looking to save money by switching energy provider? Don’t expect a big discount deal anymore ]

In response to our poll, Karen Duffy told us she has been an active switcher for years but said “the narrowing of price difference between suppliers, and the reduced number of suppliers in the energy market is making it much less worthwhile”.

“Anyone who isn’t moving utilities and TV/broadband once a year is losing the cost of a holiday annually,” added Ivor Pabast with pleasing snappiness.

“I just checked bonkers.ie as my dual gas and electricity plan from Bord Gáis is coming to its end date,” said Joanne Ní Chróinín. “There are no savings to be had.”

Her sense that she had missed the boat was echoed by Orna Richella who told us she was feeling “stupid I haven’t done before now, and realise there won’t be such good deals for the next while”.

Last weekend, the Commission for the Regulation of Utilities (CRU) reported that a record 45,518 electricity customers switched supplier in June, 72 per cent up on the same month in 2021. The CRU outlined how more than 36,000 electricity customers a month, on average, changed supplier in the first half of this year as homes and businesses actively went in search of better deals in the face of rising prices. In 2021, the comparable figure was 26,318.

Those who made the switch between January and June were among the lucky ones, or at least the ones who made the biggest possible savings on electricity and gas and many of those who have made the switch recent weeks might be forgiven for asking what that Pricewatch lad was on about after the savings we have talked about failed to materialise at the level we said they would.

Over the course of the summer we kept saying that if people moved from the dearest companies to the cheapest they could see their bills fall by €1,000 or more. It was true when we said it but it is not true now and the reality is that, at least when it comes to energy, many of the deep discounts that were on the table in advance of the summer have disappeared as the State’s energy providers moved quickly to offset the impact of rising wholesale prices by targeting switching consumers in addition to raising their standard unit rates.

[ Energy companies slashing discounts for customers looking to switch ]

That is not to say there is no point in switching energy provider if you are out of contract. There are still some incentives on offer to those who switch but the potential savings have been slashed from the 25 to 40 per cent range that was commonly available earlier this year to little more than 10 per cent in most cases which will see savings of between €300 and €400.

Moving from energy to home loans, the level of switching has not picked up as much as it might have in an era of rising interest rates.

According to a report from Daft Mortgages published earlier this month, 1 per cent of Irish homeowners are likely to switch their mortgage this year even as the overwhelming majority of customers would save money by doing so.

The report, by a stand-alone section of the Daft property website, found that 87 per cent of mortgage holders would save an average of €90 on monthly repayments by switching their mortgage this year in advance of a series of further rate hikes coming down the tracks. Making the switch will save mortgage holders an average of €8,900 over the next four years by switching and fixing their rates.

The Daft report was based on an analysis of more than 150 mortgage holders who sought a switch and save report from the company, coupled with a survey of more than 250 mortgage holders. It also suggested that 96 per cent of mortgage holders could save over the next few years if they locked in at current rates. It is worth pointing out that the figure was based on an assumption that mortgage interest rates climb by 2 per cent in the years ahead. And while that may well happen, in a world as volatile as ours, that is anything but certain.

Despite the savings, the survey found that 1 per cent of those polled were likely to switch with almost half of the respondents saying they did not know any savings at all were possible. A further 40 per cent said they had not switched because it was too much effort, while almost a quarter of respondents said they would not change providers because they thought being on a fixed-rate barred them from switching even though most Irish banks are not charging customers so-called break fees for switching. Or at least they are not charging them yet, but who knows what the months ahead might bring.

[ Only 1% of mortgage holders likely to switch lenders despite potential savings ]

Another area where switching is struggling is health insurance and less than 50 per cent of people have swapped one health insurance provider for another with many hundreds of thousands of people likely to be paying over the odds for what they perhaps do not realise is often a reduced level of care.

While it would be easy to be mystified as to why more people don’t switch, the answers are both clear and understandable. They were outlined by a unit of the Economic and Social Research Institute (ESRI) in a piece of research that is several years old but as relevant today as it was the day it was published. The study showed how easy it is to bamboozle us as consumers.

By adding just one other factor, alongside price, when describing two comparable products, consumers struggle to identify which is the best value for money. And if four factors are used in a product’s description – interest rate, length of loan, number of branches a bank has and their opening hours for example – as well as the price, the vast, vast majority of us have virtually no chance of being able to work out accurately which is the best value.

The ESRI study also revealed systematic biases in consumers’ choices, with most people assuming high-end products are better than cheaper ones, even when the available evidence makes it clear the dearer options are overpriced.

But while it is clear that companies benefit from that confusion, it is even clearer that we could all benefit more by being just a little more aggressive when it comes to looking for the best value for money.

Stick or switch

A new survey of 1,000 adults commissioned by financial services company Capitalflow and carried out by iReach looks deeper at Irish people’s attitudes and habits when it comes to switching everything from banking to telecoms, insurance to utilities, and more. The top three things people consider when deciding to switch or stick are “better deals, a seamless switching process, and a loyalty or rewards programme”.

According to the research, 91 per cent of those polled have switched some services. The number seems high to Pricewatch until we noted that it included car insurance. We have long observed a weird kink in the Irish psych when it comes to switching. People who have to be dragged kicking and screaming to the phone when it comes to most services simply can’t be stopped when it comes to car insurance. Not only is it the one product we love to switch, we love to boast about it.

[ All that is good and maybe not so golden about loyalty cards ]

Capitalflow research found that 85 per cent of adults have switched car insurance at least once, with 55 per cent having done it in the last couple of years. Switching home insurance is pretty popular too with 70 per cent saying they have done that but when it comes to health insurance the numbers switching falls back to 51 per cent.

It is not hard to see what is going on. Switching car insurance is simple and there aren’t very many variables when it comes to cover. By contrast when it comes to health insurance there are more than 300 different policies on the market with hundreds of variables. Unlike car insurance, health insurance can instil real fears in people about what the consequences might be of making the wrong call and oftentimes people who are afraid of making a mistake when offered choices opt to make no decision at all.

The pollsters also asked respondents why they did and did not switch and what their experience of switching was like. One in four said they had encountered difficulty in switching services, with 58 per cent of that cohort saying it took too long, one in four saying they were asked to jump through “too many hoops” and 38 per cent were put off by the paperwork.

When it came to people who hadn’t even tried to switch, 48 per cent said they were happy enough with the service they had while one-third though it wasn’t worth the hassle. Then there was the 17 per cent who said they “simply couldn’t be bothered”.

Maybe they could be bothered if the saw the potential savings on the table?

When asked how much they had saved, the average for people who had changed gas provider was €190, while broadband savers knocked €124 off their annual bills. People switching electricity provider saved an average of €222 while digital TV switchers knocked €107 off their annual bills. Savings of €214 were identified for health insurance switchers, €163 for car insurance and €125 for home insurance. When all those average annual savings are totted up, the total potential savings for active switchers who move companies each year come in at €1,145.

Many people would have to earn more than €2,000 to cover those savings.

The survey also points to particular difficulty when it comes to financial services with 48 per cent of respondents saying they had switched any services over the last five years. Some 24 per cent found it easy to switch a mortgage, 33 per cent found it easy to switch a loan and 42 per cent found it relatively easy to switch credit cards. When it came to average savings, those who have switched their mortgage provider cited an annual saving of €1,094, while for a switched current account the annual savings was put at €98, with credit card switchers saving €112.

Ronan Horgan of CapitalFlow pointed to trust as “one of the biggest factors when it comes to money”. “Whether it’s moving banks, taking financial advice, or sorting out that mortgage, pension or investment, consumers need to be sure of their provider,” he says. “Do the groundwork but once you are happy with that choice make that move – it really is better for your pocket.”

Speaking as the report was launched, John Lowe of MoneyDoctor.ie said it was “unfortunate that it takes an energy crisis to seriously change consumer attitudes to switching” but added that “regardless of income, savings are still savings, and we constantly need to be vigilant in order to find value. It is always worth the effort.”

Why should you switch? Here are just some of the reasons

1. Misplaced loyalty: Many of us have a sense of loyalty to the companies we are with – whether that is a bank, a health insurance providers, an energy company or a supermarket. Always bear in mind that your loyalty is almost never returned. Companies will do whatever suits them – jack up prices, close branches, leave the market or ignore your pleas for help.

2. Put manners on them: The only way service providers will learn to be better is if we are more proactive when it comes to switching. If they know that we will never take our business elsewhere no matter what they do, then they have no incentive to do the right thing.

3. A sense of smugness: Many Irish people love to boast about the deals they have got from their car insurer. But when it comes to many other areas, they almost feel a sense of shame about asking for a discount or seeking the best possible value for money. Instead of shame we should feel smug about saving money by switching – or even by threatening to switch.

4. Prices will fall: One of the few weapons consumers have in the face of rising prices or bad customer service is the ability to take their business elsewhere. If we use that weapon wisely not only will we benefit, everyone else will benefit as companies will have to respond to what we do collectively. Don’t believe us? Look at what happened when Lidl and Aldi started making serious inroads in the Irish grocery sector. Faced with the threat of losing huge numbers of shoppers all the supermarkets lowered their prices and improved their offerings.

5. Money savings: Did we mention that by switching providers you will save hundreds, if not thousands of euro? We did? Oh, well, it is worth repeating again and again and again.